Association for Public Policy Analysis & Management

Healthcare providers operating in the social safety net often function with precarious finances.  Such providers are important as they meet the healthcare needs of society’s most vulnerable members: the poor and the uninsured.  Safety net care is characterized by under provision of care relative to demand, substantial reliance on support from public payers, limited treatment options, waiting times, sluggish adoption of treatment innovations, and inadequate use of basic technologies.  These characteristics raise concern over the ability of safety net providers to adequately absorb increases in demand for services.

In this study, we examine how substance use disorder (SUD) treatment providers respond to increases in demand attribute to state-level parity laws for SUD treatment.  Although there is substantial heterogeneity across states, such laws require that private health insurance plans cover SUD treatment at parity with general healthcare services.  SUD treatment is a classic example of safety net care.  For example, 69% of SUD treatment is financed by public payers and one fifth of providers lack any kind of electronic billing system.  Thus, findings from SUD providers may be informative for safety net care more broadly. 

There are several reasons why the quantity and quality of SUD treatment is a significant social concern.  These reasons relate to the costs SUDs impose on society.  In 2009 the U.S. spent $24B on SUD treatment.  The full costs of SUDs extend well beyond addiction treatment.  SUDs are linked with morbidity and mortality, increased use of general healthcare, employment problems, and crime.  Although SUDs place a great burden on society, treatment has been shown to reduce SUDs and their associated harms.  Thus, understanding how SUD providers respond to changes in demand for treatment is important for promoting public health and minimizing social costs. 

Studies show that state-level SUD parity laws increase treatment admissions (Dave and Mukerjee 2011; Wen et al. 2013).  We build on this work to better understand how SUD treatment providers respond to demand-side shocks.  To study this question, we use highly-detailed administrative data on the universe of SUD treatment providers in the U.S. between 1997 and 2009.  Over this time period, multiple states introduced parity legislation, offering a novel quasi-experiment.  Using a differences-in-differences design, we examine provider response along several margins: admissions, client volumes, offered services, accepted forms of payment, and client characteristics.  We also explore heterogeneity by ownership and modality. 

Our findings suggest that SUD providers altered their care practices following SUD parity law implementation.  Admissions increased, client volumes and composition were unchanged, and the bundle of provided services increased.  Moreover, providers expanded the payment types they were willing to accept.  Findings were particularly strong among for-profits and in outpatient settings.  In summary, our findings suggest that SUD parity not only increased access to care, but also the quality of care received.  Moreover, as a result of parity, providers were able to extract private insurance payment from newly privately insured patients.  These findings have implications for predicting the full impact of the ACA and Federal parity for SUD treatment.